Finance Minister Arun Jaitley’s Budget for 2016-17 has generally been acclaimed with just about handful of exceptions. But, the outcry against the measures which did not go well with those directly affected was too loud to be brushed aside by the NDA government which has so far been enjoying support of the vocal middle class, though its approval rating has slipped somewhat in the past few months. The protests against the Budget proposal to levy tax on Employees Provident Fund (EPF) withdrawals were so vociferous that Prime Minister Narendra Modi had to intervene and make Jaitley announce its roll back. The levy of 1% excise duty on jewellery without input tax credit or 12.5% with CENVAT credit has also been received with howls of protests by jewellers who have put their shutters down, marching on the streets across the country. For an industry employing 2.5-3 million people, including artisans, the Budget announcement came as a shock.
As it is, the industry is reeling under the new regulation which compels the buyers to share the PAN (Permanent Account Number) for purchases above Rs 2 lakh. The trouble for the jewellers, both big and small, is that the bulk of the population still does not possess PAN number which has not seen an Aadhaar type of enrolment campaign. This is more so for the unorganised jewellers who account for over 75% of the Indian market for precious metals. Their main contention is against the paper work they would be asked to maintain while their returns could be opened by excise inspectors making unpleasant visits dimming the glitters of the showrooms.
Jaitley’s assertion in Parliament that the move is to link taxes on gold jewellery with the proposed Goods and Services Tax will not convince the traders since the counter argument could be: Get the GST Bill passed first. If the objective is to move gold crazy Indians away from the precious metal and reduce the country’s dependence on imports estimated to be 1,000 tonnes per annum, then aggressive and innovative schemes have to be launched as alternative investment avenues. The sovereign gold bond scheme that allows investment in the yellow metal without possessing it and is currently open for subscription, should be marketed in a sustained manner making it more attractive. Likewise, the gold deposit scheme aimed at recycling 22,000 tonnes of the metal lying with the Indian households should be pursued with a focus on channelising the treasure from the charitable institutions like rich temples.
